Boston Corp. purchased equipment with a cost of $70,000 at the beginning of 2016. The equipment has an estimated life of 25 years or 25,000 units of product. The estimated residual value is $7,500. During 2016, 1,100 units of product were produced with this machinery. Determine the following:

a. Amount of total accumulated depreciation at December 31, 2016, using units-of-production depreciation.

$

b. Book value at the end of 2016 using straight-line depreciation.

$

c. A company may choose units-of-production depreciation instead of straight-line,

Common size and trend percents for Rustynail Company s sales,cost of goods sold,and expenses follow. Common size percents. 2017 sales 100 % 2016 sales 100 %,2015 sales 100 %. Cost of goods sold 2017. 63.1 . 2016 60.9. 2015. 57.4. Total expenses. 2017 , 14.3 , 2016. 13.8. 2015. 14.1
Trend percents. 2017.              2016           2015

           
sales.                   104.5%           103.3 %     100

cost of goods sold 114.9.        109.6.       100

total expenses.         106.1.        101.1.      100

Compute and Interpret Altman's Z-scores

Following is selected financial information for eBay Inc., for its fiscal years 2016 and 2015.

Compute and interpret Altman Z-scores for the company for both years. (Do not round until your final answer; then round your answers to two decimal places.)
2016 z-score = Answer
2015 z-score = Answer

Which of the following best describes the company's likelihood to go bankrupt given the z-score in 2015 compared to 2016.

The z-score in 2016 decreased slightly. Z-scores for both years are in the gray area indicating some risk of bankruptcy.

The z-score in 2016 increased slightly, which suggests the company's risk of bankruptcy has increased.

The z-score in 2016 increased slightly. Z-scores for both years are in the gray area indicating some risk for bankruptcy

The z-score in 2016 decreased slightly, which suggests the company's risk of bankruptcy has decreased.

Compute and Interpret Altman's Z-scores Following is selected financial information for eBay Inc., for its fiscal years 2016 and 2015. (In millions, except per share data) 2016 2015 Current assets $ 8,875 $ 7,904 Current liabilities 3,847 2,263 Total assets 23,847 17,755 Total liabilities 13,308 11,179 Shares outstanding 530 741 Retained earnings 14,959 7,713 Stock price per share 29.69 27.48 Sales 8,979 8,592 Earnings before interest and taxes 2,325 2,197 Compute and interpret Altman Z-scores for the company for both years. (Do not round until your final answer; then round your answers to two decimal places.) 2016 z-score = Answer 2015 z-score = Answer Which of the following best describes the company's likelihood to go bankrupt given the z-score in 2015 compared to 2016. The z-score in 2016 decreased slightly. Z-scores for both years are in the gray area indicating some risk of bankruptcy. The z-score in 2016 increased slightly, which suggests the company's risk of bankruptcy has increased. The z-score in 2016 increased slightly. Z-scores for both years are in the gray area indicating some risk for bankruptcy The z-score in 2016 decreased slightly, which suggests the company's risk of bankruptcy has decreased.

John Hanning owns a small hotel. The following balances were taken from his books on 31 December 2016

Takings (Sales)
Premises, at Cost
Fixtures and Fittings at cost

Minibus
Provision for depreciation, 1 January 2016: Fixtures and fittings

Minibus
Stock of wine, 1 January 2016 Debtors
Creditors
Bank overdraft
Cash in hand
Wages
Cleaning
Purchase of food and wine Running expenses of minibus Bank interest (Dr Balance) Advertising
General expenses
Capital

Drawings

$

283,670.00 396,000.00 100,000.00

10,000.00

45,600.00 3,600.00 1,200.00 6,500.00 3,970.00

16,450.00 700.00 61,020.00 27,830.00 121,700.00 4,800.00 1,520.00 5,880.00 13,140.00 427,000.00 30,000.00

Page 2 of 6

Additional information:

1. Depreciation policies:

   The fixtures and fittings should be depreciated at 15% on cost. The minibus should be depreciated at 20% of the written down value.

2. $3,000 of the total for the purchase of food and wine was in respect of food used by Larsen and his family.

3. Stock of wine at 31 December 2016 was $1,340.

4. Bank interest of $280 had accrued at 31 December 2016.

5. Advertising, costing $900, had been paid in December 2016. This was for advertising leaflets to be published in 2017.

6. Bad debts, $1,190, were to be written off.

REQUIRED

1. (a) Prepare the Income Statement for the year ended 31 December 2016.

   [20 Marks]

2. (b) Prepare the Statement of Financial Position as at 31 December 2016.

   [20 Marks]

ALF’s Pet Supply Manufacturing produces a variety of pet products. ALF’s accounting records for 2016 contain the following information:

Two of the products that ALF’s produces are food bowls and chew toys. At the start of 2016, food bowl manufacturing was expected to use 5,000 direct labor hours and chew toy manufacturing was expected to use 10,000 direct labor hours during the year. Actual usage during 2016 was 4,000 direct labor hours for food bowl manufacturing and 12,000 direct labor hours for chew toy manufacturing.

ALF’s uses normal costing and allocates overhead costs using direct labor hours.

a. The 2016 predetermined overhead allocation rate is:

b. The amount of manufacturing overhead costs allocated to food bowl production during 2016 is:

c. The amount of manufacturing overhead costs allocated to chew toy production during 2016 is:

d. Manufacturing overhead costs during 2016 have been:

CHOOSE ONE:             OVERAPPLIED             UNDERAPPLIED                       NEITHER

e. If ALF’s instead allocated overhead costs using direct material costs rather than direct labor hours, the total amount of manufacturing overhead costs allocated during 2016 would have been:

CHOOSE ONE:             HIGHER           LOWER            THE SAME       NOT ENOUGH INFORMATION

In late September 2016, the US Treasury issued three T-Bills, and they had issued a one-year T-Bill on September 15, 2016:

1. Calculate the bank discount rate for each security using the formula given in the chapter (=(FV – Price)/FV * 360/M, where M is the number of days until maturity) and using the DISC function.
2. Calculate the bond equivalent yield for each security using the formula given in the chapter (=(FV – Price)/Price * 365/M, where M is the number of days until maturity) and using the YieldDisc function.

a) What is the Bank Discount Rate (rounded to 4 decimals) for the 52-week security?

b) Using the DISC formula, do you get the same answer as the Bank Discount Rate?

c) What is the Bond Equivalent Yield for the 26-week security?

d) Using the YieldDisc function, do you get the same answer as the Bond Equivalent Yield?

Thank you in advance

Neilson Tool Corporation's December 31 year-end financial statements contained the following errors:

.........................................December 31, 2016 ...............December 31, 2017

Ending Inventory ..........$9,600 overstated ..................$8,100 understated

Depreciation Expense ..$2,300 overstated ............................-

An insurance premium of $66,000 covering the years 2016, 2017, and 2018 was prepaid in 2016, with the entire amount charged to expense that year. In addition, on December 31, 2017, fully depreciated machinery was sold for $15,000 cash, but the entry was not recorded until 2018. There were no other errors during 2016 or 2017, and no corrections have been made for any of the errors. Neilson follows ASPE.
Instructions
Answer the following, ignoring income tax considerations.

(a) Calculate the total effect of the errors on 2017 net income.

(b) Calculate the total effect of the errors on the amount of Neilson's working capital at December 31, 2017.

(c) Calculate the total effect of the errors on the balance of Neilson's retained earnings at December 31, 2017.

(d) Assume that the company has retained earnings on January 1, 2016 and 2017 of $1,250,000 and $1,607,000, respectively; net income for 2016 and 2017 of $422,000 and $375,000, respectively; and cash dividends declared for 2016 and 2017 of $65,000 and $45,000, respectively, before adjustment for the above items. Prepare a revised statement of retained earnings for 2016 and 2017.

(e) Outline the accounting treatment required by ASPE in this situation and explain how these requirements help investors.